Learning to Budget

[poohhbear1221]

I am a real newbie and looking to set up a budget any advice on how to get started.. I like this envelope thing but not sure on how it works.. any advice on how to get started so i can get out of this vicious cycle of spending Im in?

[disneysteve]

The two most important aspects of developing a budget are knowing exactly how much money is coming in and exactly how much is going out and where it is going.

The coming in part is generally easy assuming you have a steady income source.

The going out part is where you need to do some work. Start by writing down every regular, recurring expense that you have. This includes things like rent/mortgage, taxes, utilities: phone, gas, electric, water, cable, internet, insurance premiums, tuition, etc.

Then get a little notebook, carry it with you at all times, and record every penny you spend on absolutely anything for a month.

At the end of the month, sit down with your lists and divide every expense into 2 categories: Want or Need. You need to be very specific here. Phone service is a Need. Caller ID, call forwarding, voice messaging, etc. are wants. Having a car is a Need. Getting it detailed every other month is a Want. Having a TV is a Need. Having premium digital cable and a 42" plasma screen is a Want. You get the idea.

Don't forget to include expenses that don't get paid monthly, like magazine subscriptions, insurance premiums, auto registration, club dues, etc.

So once you've done all of that, look at the bottom line. If your expenses are greater than your income, you need to take a good look at that Wants column and start cutting back. If your income is greater, you're off to a good start, but you may still need to trim the Wants if you aren't saving adequately.

Don't ignore that Needs column, though. Just because you need a phone, doesn't mean you currently have the cheapest plan. Just because you need life insurance doesn't mean you shouldn't shop around and see if you can find a cheaper policy.

[poohhbear1221]

thanks for getting me started .. i get my check on the 3rd of the month so i can start everything at the beginning of october..

[LuxLiving]

Before you get your check and before you spend a dime - plan on where that money has to go towards meeting your obligations. At the very least get a piece of paper and put your income in as a plus and start subtracting out what all the monthly obligations are.

I'm assuming you probably pay rent/mortgage/housing of some kind and it's most likely due on the first. Have you been paying behind on this? If so you'll need to do something towards saving back for that so that you're ahead of your November paycheck coming in on the third. If you plan ahead and can swing it you'll have money set aside for housing so you'll be able to pay it before it's due on November 1st.

Also, if you can, start thinking about putting a bit back for starting an Emergency Fund.

Good luck and stick around and don't be afraid to ask questions when you get stuck.

[autoxer]

Originally Posted by disneysteve

The going out part is where you need to do some work. Start by writing down every regular, recurring expense that you have. This includes things like rent/mortgage, taxes, utilities: phone, gas, electric, water, cable, internet, insurance premiums, tuition, etc.

Then get a little notebook, carry it with you at all times, and record every penny you spend on absolutely anything for a month.

At the end of the month, sit down with your lists and divide every expense into 2 categories: Want or Need.

Excellent advice. That is exactly what I did. After looking over my spending habits, I was able to prioritize what was important to me, and what I could do without.

Originally Posted by poohhbear1221

any advice on how to get started so i can get out of this vicious cycle of spending Im in?

When I first tried to control my spending, I took all of the credit cards out of my wallet & put them in my sock drawer. I put myself on a cash allowance to pay for gas, food & entertainment. That was the only way to give me the self control to stop spending when the money ran out. What are some of your spending habits?

[jmjj215]

Having a TV is a Need

I take friendly issue to this one. We haven't had a TV in the 3 1/2 years we've been married and it's great!

[disneysteve]

Originally Posted by jmjj215

I take friendly issue to this one. We haven't had a TV in the 3 1/2 years we've been married and it's great!

No argument here. I could happily live without one. But realistically, I think it's fair to consider it as a need for budget purposes. Very few people are willing to do without one. The problem comes when people spend ridiculous amounts for the set, then an equally ridiculous amount on cable service.

We've got a regular 25" TV we bought about 8 or 9 years ago. It cost about $250. And we had a roof antenna installed by the previous owner of our house, so no monthly fee. We did finally break down and get limited basic cable in February ($9.99/month). I would never spend more than that.

[Broken Arrow]

I'm doing fine without cable so far.

See?

*twitch*

[scfr]

Disneysteve's advice is spot on. Follow that advice and you can't go wrong. That's the first thing we did, 14 years ago, when getting our financial life on track, and it was the best first step we could have taken.

One thing to add, once you've done everything he mentioned: Start budgeting in advance for the "unexpecteds" either by setting up a general emergency fund, or by specific category.

For example, if you have a pet and you currently spend about $20 for it's food and other supplies, you could budget $40 per month and "bank" the extra. That way, if Fido or Fluffy come down with cancer in 3 years, you'll already have $720 saved & budgeted to treat that.

Same thing for car repairs, house repairs or upgrades, your own medical or dental, etc.

[disneysteve]

Originally Posted by scfr

One thing to add, once you've done everything he mentioned: Start budgeting in advance for the "unexpecteds" either by setting up a general emergency fund, or by specific category.

Same thing for car repairs, house repairs or upgrades, your own medical or dental, etc.

Very true. So many "emergencies" that get people in trouble really aren't emergencies. They are things that should be anticipated. Cars need to be repaired. People and pets get sick. Appliances break. Gift-giving events crop up.

I actually dislike the term "emergency fund" for just that reason. I prefer to just call it savings. You need to set aside a certain amount each month for "stuff" that is guaranteed to happen.

[creditcardfree]

Originally Posted by disneysteve

I actually dislike the term "emergency fund" for just that reason. I prefer to just call it savings. You need to set aside a certain amount each month for "stuff" that is guaranteed to happen.

I have a basic savings account for this. I've heard someone refer to it as a slush fund. I've picked a dollar amount to put into the slush fund each month and have it auto transfered to savings. It is just like any other bill to us.

[poohhbear1221]

some of my regular expenses are rent/ electric/ cable/ phone and then i have my meds cause my insurance doesnt pay for it all.. also have a 80/20 medical insurance plan where i pay 20 percent.. and i have to see the doctor at least once a month because of diabetes.. other than that i usually just spend whatever i have.. it burns a hole in my pocket actually and that is something i want to get out of the habit of doing .. i also work in a grocery store so i get pretty good discount for food and it usually costs me approx 30 a week in groceries

[jmjj215]

Originally Posted by poohhbear1221

some of my regular expenses are rent/ electric/ cable/ phone and then i have my meds cause my insurance doesnt pay for it all.. also have a 80/20 medical insurance plan where i pay 20 percent.. and i have to see the doctor at least once a month because of diabetes.. other than that i usually just spend whatever i have.. it burns a hole in my pocket actually and that is something i want to get out of the habit of doing .. i also work in a grocery store so i get pretty good discount for food and it usually costs me approx 30 a week in groceries

Is that feeding just yourself -- or are there other mouths to feed?

Writing down everything I spend goes a long way for me.

[poohhbear1221]

there are 3 of us here and i supply all the food and what not for the family

[jmjj215]

Originally Posted by poohhbear1221

there are 3 of us here and i supply all the food and what not for the family

that's a pretty slim budget for food!

[moniqued57]

i have just joined and i am very impressed by all the advice. i am now trying to start my life over after a terrible divorce 2 years ago. i have sold my house to the bank which means i got nothing and because i am so scared to buy a house again i am about to lease a home w/ my current boyfriend. i am a police officer he owns his own construction Co. i know he is not the best with money and i really need to buget, its just hard when we are starting over. i dont want to be a nag about money, and he does know where i stand with our finances. how can we share the responsiblities without me sounding like i want control over all money. any advice is appreciated thanks again..desiree

[bjl584]

To get started you may want to write down every dime that you spend for the next few weeks or for the next month. At the end you will be amazed at how much you spend on things that you could most likely do without. Then you can formulate a strategy to start "trimming the fat." You may have to cut back on fun, but as the old saying goes, "you had your fun, now it's time to pay the piper." You'll probably want to cut down on things like eating out, shopping at the mall, cable tv, etc. until you can get ahead of the game. All of the extra money you save can be used to pay down old debt or invested in an account. Either way, I'd say that you first need to find out where your money is going. Just write down everything that you spend money on. Bills, gas, entertainment, everything.

[vsjhoc]

Originally Posted by creditcardfree

I have a basic savings account for this. I've heard someone refer to it as a slush fund. I've picked a dollar amount to put into the slush fund each month and have it auto transfered to savings. It is just like any other bill to us.

I do the same. I was glad it was there when I lost my job and had no income for 5 months. I was glad it was there when I decided to start a small business. I was glad it was there when my never-had-any-trouble car suddenly needed a $1100 repair. The account doesn't have a lot of money in it now, but I am auto transferring a small amount monthly to build it back up.

[vsjhoc]

Originally Posted by moniqued57

i have just joined and i am very impressed by all the advice. i am now trying to start my life over after a terrible divorce 2 years ago. i have sold my house to the bank which means i got nothing and because i am so scared to buy a house again i am about to lease a home w/ my current boyfriend. i am a police officer he owns his own construction Co. i know he is not the best with money and i really need to buget, its just hard when we are starting over. i dont want to be a nag about money, and he does know where i stand with our finances. how can we share the responsiblities without me sounding like i want control over all money. any advice is appreciated thanks again..desiree

Welcome! And congrats on starting over. A lot of us have been there.

You probably won't like this advice, but ... please think really really hard about leasing with the BF. Are you both going to sign the lease? Can you afford to pay the entire rent if he can't come up with his portion since "he is not the best with money"? Can you afford to pay the entire rent if you break up or he moves out suddenly? If you can't pay the rent, do you understand how that affects your credit and your ability to rent in the future? Do you hear me saying "don't do it"? Just my $0.02.

[bjl584]

I agree. Unless you are certain that you can make it on your own, I would say that signing a lease with your boyfriend is a bad idea.